A factory doesn’t necessarily mean production
Setting Up Production in India: What Matters Before You Get Started
You can incorporate a company, rent a facility, and install machinery, but that still doesn’t guarantee that your Indian operation will produce reliably, cost-effectively, and to the desired quality standards.
If you’re setting up production in India, relocating your domestic production to India, or adding a new facility to complement your existing plants, you’ll need to make some fundamental decisions early on: What should actually be manufactured in India? Which production model is right for you? Do you need your own company, or would an Indian partner make more sense? How do you find the right location? And how do you ensure that the connection between India and your European headquarters functions smoothly on a day-to-day basis?
Before starting production, you should clarify these seven points in particular: your strategic goal, the planned value creation, the proposed production model, a suitable location, your business case, the supply chain, and the coordination between India and your European headquarters.
Our experience shows time and again that production projects in India do not fail because of India itself or individual technical aspects. In most cases, failure has its roots right at the very beginning: a vague vision, a lack of robust planning, and unclear responsibilities.
1. What do you hope to achieve by manufacturing in India?
The goal of your manufacturing operations in India determines all subsequent decisions—from the production model to the location.
Do you want to better serve the Indian market? Reduce import costs? Supplement your supply chain as part of a China+1 strategy? Establish an export base for Asia? Or are your customers demanding a stronger local presence?
Depending on your goals, the right solution can vary greatly. If you initially plan to supply only individual customers in India, you may not need a fully integrated plant just yet. If you want to build local value creation and tap into additional export markets in the long term, your structure should be able to scale with your business from the start.
2. What value-added activities should actually take place in India?
“Production in India” can refer to simple assembly, the manufacture of individual components, or a fully integrated plant.
Therefore, decide early on:
- Which products and variants are to be manufactured in India?
- Which production steps will remain in Germany for now?
- Which components do you import?
- Which parts can you source locally?
- What level of vertical integration is truly necessary for your customers and the Indian market?
A phased approach can be beneficial: first, pilot production or assembly; then, establishing a network of local suppliers; and later, expanding into additional stages of the value chain.
It is crucial that this development not be left to chance. You need a clear localization strategy combined with a realistic assessment of which processes, machinery, materials, and skills are required locally to achieve this.
3. Which approach is right for your company?
Which production model makes sense for you depends on your goals, your need for control, your willingness to invest, and your timeline.
| Your Starting Point | Possible starting point | Here’s what you should pay special attention to |
|---|---|---|
| You’d like to test the Indian market first. | Pilot production, assembly, or contract manufacturing | Agree on clear quality and delivery standards. Also clarify whether and how the partner can later be replaced or supplemented by your own structure. |
| You want to establish your own structures and maintain a high degree of control in the long term. | A wholly-owned subsidiary with its own production facility | Allow enough time for corporate structure, location, staffing, permits, and governance. Your structure should be able to scale as your business grows from the very beginning. |
| You need local networks, customer contacts, or operational resources. | Joint venture or partnership with an Indian partner | Carefully evaluate the partner and establish decision-making authority, IP protection, responsibilities, and potential exit strategies. |
| They would like to relocate individual production steps to India. | Gradual implementation with setup and step-by-step localization | Define a realistic localization strategy and determine which components will be imported initially and which will be sourced locally later. |
| You already have a manufacturing facility in India, but you are not meeting your goals. | Operational Assessment, Stabilization, or Interim Management. | First, ensure transparency regarding costs, quality, delivery capacity, personnel, and responsibilities. Only then can decisions be made about further investments. |
Choosing a model is therefore not purely a legal decision; rather, it determines how much control you have, how quickly you can get started, what risks you bear, and what growth opportunities your location will offer in the future.
4. How do you find the right production location in India?
The right location isn’t necessarily the cheapest one. It must align with your production volume, your staffing strategy, and your expansion plans.
Consider the following, among other factors:
- Are there qualified specialists and managers available locally?
- How reliable are the electricity and water supplies in this area?
- How easily accessible are customers, suppliers, ports, and airports from there?
- What permits and environmental regulations apply in this state?
- Can the location be expanded later if your project is set to grow?
- How reliable are government agencies and local service providers, and how strong is the professional network?
Newcomers to the Indian market also often underestimate additional infrastructure costs. Fire safety measures, access roads, dedicated transformers, water reservoirs, and wastewater treatment can significantly increase your investment requirements.
The choice of location should therefore not depend solely on where a personal contact or a potential partner is based. It should be based on a systematic comparison of locations .
5. Is your business case realistic?
A sound business case takes into account not only machinery and buildings, but also the costs of setup and subsequent operation.
These include, among other things:
- Permits and local infrastructure,
- Technology Transfer and Training,
- Quality management,
- Logistics and Import Processes,
- Working capital, start-up losses,
- Follow-up investments,
- Costs due to delays.
Also, plan for various scenarios. What happens if your production starts later than expected? If capacity is lower than anticipated at first? If local suppliers aren’t yet delivering the expected quality?
A good business case doesn’t just show you when your investment will ideally pay off. It also shows how resilient your project is under more challenging conditions.
6. How will you establish your supply chain and technology transfer?
Your plant can only operate as reliably as the supply chain it’s integrated into.
Therefore, identify and evaluate suppliers early on. In addition to price, consider quality, capacity, on-time delivery, financial stability, and potential single-source dependencies. Technology transfer also deserves special attention. Simply shipping machinery to India does not constitute a functioning production setup. Processes must be documented, employees must be trained, and quality requirements must be clearly communicated.
If SOPs, test plans, and assigned responsibilities are missing, your production remains dependent on individual employees. This poses a significant risk, especially during the ramp-up phase. Structured sourcing processes and a robust human resources management help standardize processes and clearly define responsibilities.
7. How do you manage production between India and the European headquarters?
Clear governance ensures that your Indian team can work independently while you still maintain the necessary transparency here in Europe.
How much decision-making authority should your Indian team have? Which issues must be coordinated with the European headquarters? Who is responsible for quality, finance, procurement, and human resources?
Define the following early on:
- Roles and decision-making authority,
- reporting lines,
- Escalation procedures,
- key performance indicators,
- Regular management reviews,
- proxy and succession arrangements.
Without clear governance, headquarters can quickly interfere too much in day-to-day operations—or lose track of the big picture. Both of these situations make it difficult to build an effective organization. Find out how a “facilitator” at headquarters can ensure this balance here.
Standards: yes – Copy-and-paste: no
European quality and governance standards are also an important benchmark in India. What doesn’t work, however, is applying them unchanged to day-to-day production in India. Success comes to those who combine clear standards with local implementation experience and adapt processes, responsibilities, and management where Indian conditions differ.
However, it is precisely at this juncture that we repeatedly encounter difficulties; this is where it is determined whether a newly built factory will truly become a production site capable of sustaining long-term operations.
What is the best approach to setting up production in India?
A production project should be planned in clearly defined phases:
- Orientation: Clarify the vision, market, scope of production, and initial risks
- Strategic Planning: Evaluate the production model, location, business case, and organizational structure
- Setup: Establish the company, infrastructure, personnel, suppliers, and processes
- Start-up: Launch production, ensure quality, and stabilize operations
- Further Development: Improve performance, build additional value, and further develop the site
Setting up production isn’t just about planning a new plant. It involves establishing a complex business structure—including the company, the location, personnel, suppliers, processes, and interfaces with the European headquarters.
How does Dr. Wamser + Batra support production setup in India?
We have been supporting companies in the planning and practical implementation of production projects in India for decades and are therefore familiar with both successful and failed scenarios. Our experience spans more than 150 production projects, including in mechanical engineering, electronics, automotive, pharmaceuticals, and plant engineering. Our goal is not merely to set up a production facility in the best possible way. It is to work with you to make it economically viable, manageable, and capable of long-term growth.
Are you planning to set up production in India, looking for a suitable manufacturing partner, or hoping to stabilize an existing facility? Talk to us about your plans.
